Dollar nears 3-week highs as Powell squashes negative rate hopes

Reuters LONDON | Updated on May 14, 2020 Published on May 14, 2020

File Photo   -  Reuters

The dollar climbed towards a three-week high on Thursday as risk appetite deteriorated broadly after Federal Reserve Chairman Jerome Powell dismissed speculation about negative interest rates.

Though Powell is the latest in a parade of policymakers to brush off the notion that they might push rates into negative territory, Fed futures were pricing a small chance of sub-zero US rates by March next year.

While the Fed chairman also urged more fiscal stimulus to support the economy, Mark Haefele, chief investment officer at UBS Global Wealth Management said the ongoing partisan tensions suggest additional stimulus is “unlikely to immediately materialize”.

Powell's comments sent investors scurrying to the relative safe-haven appeal of the greenback while US stocks posted their biggest two-day fall in more than three weeks.

Against a basket of its rivals, the dollar edged 0.15 per cent higher at 100.30, hovering below a three-week high of 100.44 tested earlier this week.

“The downbeat message from Powell has contributed to more risk off trading conditions overnight, which is also helping to support the US dollar,” MUFG strategists said.

Among major currencies, the Australian dollar led losers after data showed the country shed jobs in April at the fastest pace on record, suggesting more monetary and fiscal easing may be needed to support the economy.

The Aussie fell 0.3 per cent to $0.6437 after data showed unemployment increased by 594,300 in April, slightly more than the median estimate. The jobless rate rose to a five-year high.

The pound also tumbled below the $1.22 line for the first time in more than five weeks after Wednesday's data showed Britain's economy shrank by a record 5.8 per cent in March as the coronavirus crisis escalated.

Investors are now focused on data from the United States and Europe in the next two days for more clues on the depth of the downturns there. US initial jobless claims data is due on Thursday while the eurozone reports first-quarter GDP data on Friday.



Published on May 14, 2020

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